EU leads trading partners in retaliating to US steel tariffs

The EU is preparing three separate courses of action to respond to the imposition of tariffs on steel imports into the US.

On 18 March, the Commission spelt out its proposed strategy to respond to the tariffs. A three pronged approach involves:

  • a complaint to the WTO, contesting the compatibility of the US measures with WTO rules. The first step in this procedure was taken on 7 March, when the EU requested formal consultations with the US.
  • the adoption of safeguards to ensure that steel imports diverted from the US market do not flood Europe. The procedure for the introduction of these measures are strictly regulated by the WTO Agreement on Safeguards.
  • action, also under the WTO safeguards agreement, to seek compensation from the US, in order to maintain the overall balance of of trade concessions.

EU trade negotiators met with their US counterparts in Geneva on 19 March, to discuss the compensation request. They argued that the value of the imports affected by the tariffs amounts to $2.5 billion per year. After a brief meeting, they reported that the US had given no details as to the nature of possible compensation, and argued that they were playing for time.

The Commission’s proposal to introduce its own safeguard measures were discussed by the Member States’ trade experts in Brussels, also on 19 March. It is reported that measures in the form of tariff rate quotas may be adopted by end of the week.

EU Trade Commissioner Pascal Lamy, in Spain for a meeting of the EU’s Trade Ministers on 18 and 19 March, refused to comment on the nature of the safeguard measures but did confirm that action was imminent. However, on the question of retaliation against US products, the Commissioner conceded that there were different interpretations on the permitted timing of this under WTO rules.

Japan, which has already held bilateral talks with the US and is participating as a third-party in the EU complaint to the WTO, is expected to lodge its own complaint as soon as the US action takes effect. Australia, New Zealand, South Korea, Norway, Switzerland, Malaysia, Brazil, Taiwan and China are amongst the countries that are reportedly preparing their own response.

 

The world steel market faces significant overcapacity and the US has been slow to introduce the necessary restructuring measures. More than 30 US steel producers have gone bankrupt over the last four years.

The US International Trade Commission (ITC) ruled at the end of 2001 that foreign producers have been flooding the US market with cheap imports, and recommended that the US administration should introduce import tariffs for steel. On 5 March, President George Bush announced the imposition of tariffs of between 8% and 30% on a range of products from Europe, Asia and Latin America.

 

The EU is expected to announce its own safeguard measures within days.

 

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